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You terminate Bob. Severance in hand — exactly what the contract says: four weeks.
Your lawyer drafted it two years ago. You paid good money for it. You’re confident.
Bob’s lawyer sends a letter two weeks later.
The termination clause? Unenforceable. One bad sentence and the whole thing fell apart.
You don’t owe Bob four weeks. You owe him eight months.
Here’s what most employers don’t know: When your contract fails, you don’t land on ESA minimums. You fall all the way into common law — and common law is expensive.
Most employers think termination works like this: you have your contract, and if the contract fails, you fall back to ESA minimums as a safety net.
Wrong.
There are actually three levels — and understanding the difference is what separates a $15,000 termination from a $150,000 one.
Level 1: Valid employment contract. Your termination clause governs. You pay what it says — typically ESA minimums or slightly above. This is where you want to be.
Level 2: No contract, or unenforceable contract. Common law reasonable notice applies. Courts determine what’s fair based on the employee’s age, tenure, role, and how easy it would be for them to find comparable work. This is where it gets expensive.
Level 3: ESA minimums. These are the absolute statutory floor — and they only protect you if you have a valid contract limiting you to them, or if common law happens to produce a lower number (which almost never happens for anyone with meaningful tenure).
The critical misunderstanding: ESA minimums are not the fallback when your contract fails. When your contract is thrown out, courts don’t default to “well, at least you only owe the statutory minimum.” They go straight to common law. You skip Level 1 and land at Level 2.
Common law reasonable notice is determined by the Bardal factors, established in Bardal v. Globe & Mail: age of the employee, length of service, character of the employment (seniority, specialization), and availability of similar work.
What this means in practice: Bob, age 52, six years as a marketing manager, earning $85K per year. ESA minimum: six weeks. Common law: 10 to 14 months. Difference: $65,000 to $90,000.
The range is wide — courts have discretion. Senior employees, specialized roles, and older workers attract longer notice periods. But even entry-level employees with a few years of service can be owed three to six months at common law.
The termination clause violates ESA minimums. Courts will strike down any clause that, even accidentally, provides less than the statutory minimum. The tricky part: this includes things employers don’t think about. A clause that says “two weeks notice per year of service” sounds reasonable — until you realize it doesn’t mention benefits continuation during the notice period, which most provincial ESAs require. The entire clause gets struck out. Bob gets common law.
The clause was signed after Bob started working. No fresh consideration means unenforceable. Classic scenario: employer hands Bob the contract on Day 1 or Week 2 — he’s already employed. Courts treat it as an attempt to change existing terms without anything of value exchanged in return. Contract void. Bob gets common law.
The role changed substantially. The changed substratum doctrine applies when Bob’s responsibilities, title, or compensation changed significantly without an updated contract. No anti-obsolescence clause means the original contract may no longer apply.
The clause is ambiguous. Courts interpret ambiguous termination clauses against the employer. If it’s not crystal clear what you’re limiting and how, you lose. “Reasonable notice” written into a contract means common law notice — the exact outcome you were trying to avoid.
An illegal clause contaminates the rest. An overly broad non-compete, or a clause that limits rights employees can’t legally waive, can bring down the whole agreement. Unless you have a severability clause, courts may strike the entire contract rather than just the offending section.
The gap between ESA minimums and common law isn’t a rounding error. It’s the difference between a manageable termination and a lawsuit you didn’t budget for.
A two-year employee earning $50K at age 30 faces an ESA minimum of roughly two weeks. Common law gives them two to three months. Gap: $6,000 to $10,000.
A five-year employee earning $80K at age 45 faces an ESA minimum of five weeks. Common law gives them eight to ten months. Gap: $45,000 to $58,000.
A ten-year employee earning $120K at age 55 faces an ESA minimum of eight weeks. Common law gives them fourteen to eighteen months. Gap: $120,000 to $155,000.
Multiply that by every employee you’ve terminated in the last three years. Multiply again by everyone you might terminate in the future.
A termination clause that holds up in 2026 needs to clear several bars. It must not contract out of ESA minimums — including notice, severance pay, and benefits continuation throughout the notice period. It must be clear and unambiguous with no room for interpretation. It must have been signed before employment began, or with fresh consideration after.
It should also include a saving provision — language that says if the clause falls below ESA minimums in any given scenario, ESA applies instead. This is the safety net that keeps a technical drafting error from voiding the whole clause. And it should include a severability clause — if one part of the contract fails, the rest stands.
Perhaps most importantly: it should be reviewed as case law evolves. A clause that was bulletproof in 2019 may not be valid today.
Canadian courts have been increasingly willing to strike down termination clauses, and the trend is accelerating.
The landmark case is Waksdale v. Swegon North America (Ontario Court of Appeal, 2020). An employee challenged his termination clause. The without-cause termination language was actually fine — but the just-cause section violated the ESA. The court struck the entire termination provision. Both sections fell together.
This changed the game. Even a technically valid without-cause clause can be voided if the for-cause clause anywhere in the contract is problematic. Employment lawyers across Canada have been reviewing and redrafting termination clauses ever since.
What was good enough in 2018 may not hold up in 2026. The clause you’re relying on today deserves a second look.
RascalHR employment contracts are drafted to current case law — including Waksdale and the decisions that followed. Every termination clause includes explicit ESA saving provisions, severability language, and properly separated just-cause and without-cause sections with province-specific compliance built in.
And unlike a contract your lawyer drafted two years ago and filed away, RascalHR updates as case law changes. The clause that protects you today will still protect you in three years — because it won’t be frozen in 2023.
ESA minimums are a floor — but only if your contract is valid and clearly limits you to them.
If your contract fails, you skip ESA entirely and land in common law. Common law is expensive. Potentially 10 to 20 times what you thought you owed.
The fix isn’t complicated. Get a properly drafted, currently compliant employment contract. Review it when the law changes.
The cost of getting it right is almost always lower than the cost of getting it wrong.